Former Pittsburgh Police Chief Nate Harper was indicted by a federal grand jury Friday on charges he illegally diverted more than $70,000 that was received by the Police Bureau's special events office and he spent more than $31,000 of that money on himself.

Former Pittsburgh Police Chief Nate Harper has been indicted by a federal grand jury on charges he illegally diverted more than $70,000 in police funds and spent more than $31,000 of that money on himself.

"The allegations represent the worst kind of public corruption: the theft of public funds by a person in a position of high public trust, a critical position of public safety, in this case, the police chief of Pittsburgh," U.S. Attorney David Hickton said during a Friday afternoon news conference.

Harper, 60, pleaded not guilty during his arraignment in federal court on Friday afternoon and was released on $100,000 bond. Attorneys Robert Del Greco and Robert Leight said Harper's not-guilty plea was a formality and that the former chief plans to plead guilty at a later date.

According to the indictment unsealed Friday, Harper authorized others to open two Police Federal Credit Union accounts that he allegedly used to access the money from September 2008 to December 2012.

The fund was established as repository for a $3.85-per-hour fee the city charges bars, restaurants and other businesses when they hire off-duty police to work security details.

"The diversion occurred at the Office of Personnel and Finance, that's where the conspiracy occurred. That's where the diversion occurred to create accounts that were off the books in the Police Credit Union," said Hickton.

The indictment says Harper used the credit union funds for purchases at The Wine Loft, Grandview Saloon, Harris Grill, Nakama, Atria's, Church Brew Works and Sam's Club, including the purchase of a 32-inch TV.

Of the 49 restaurants listed in the indictment, $3,358.12 were spent on food and alcohol.

Then, there’s a six day period around Christmas Eve 2010 that Harper’s accused of buying perfume and gift cards from Macy’s. Soon after, he allegedly spent $74.88 on movies at a location called “Monroeville News.” Monroeville dispatchers and numerous area businesses confirm the former news stand sold newspapers and movies, including adult entertainment.

"I'm satisfied in the document that I signed and that the grand jury returned, that these are not legitimate expenses, but as I said, it was not proper to divert the money in the first place and it was not proper to spend it on himself," said Hickton.

When asked how he would characterize the use of public funds, Hickton responded, "Other than illegal?"

He said authorities are hoping to recover the funds.

"These monies belong to the taxpayers, and they have been taken by theft," said Hickton.

Harper is charged with conspiracy to commit an offense against the United States and four counts of filing to file tax returns from 2008-2011.The charges carry a maximum penalty of nine years in prison and fines of up to $650,000.

Hickton said it's difficult to say why someone who is charged with a crime did what they did, especially Harper, who spent his career in law enforcement.

"This is a sad day for most of us. We worked with him as a partner in many of the joint law enforcement efforts. He worked with us on G20. He helped us when we were trying to find out who was making bomb threats to the University of Pittsburgh," said Hickton. "This is puzzling and baffling behavior and it's a sad day."

In a statement released on behalf of the Police Bureau, acting Chief Regina McDonald said, "We are saddened to learn of the Federal indictments against former Police Chief Nathan E. Harper. The Pittsburgh Bureau of Police wants to reassure the residents of the City of Pittsburgh that our officers and civilian personnel are dedicated hardworking professionals who will continue to protect and serve the City of Pittsburgh to the best of our ability."

Harper resigned under pressure on Feb. 20 after Mayor Luke Ravenstahl met with the FBI about the investigation, though neither Ravenstahl nor Harper have said what the investigation entails.

"Today is a sad day for the Bureau of Police, and for the City of Pittsburgh as a whole," Ravenstahl said in a statement about Harper's indictment. "We will continue to work tirelessly to rebuild the Bureau and to ensure that Pittsburgh remains one of the nation’s safest cities."

The FBI, IRS and federal prosecutors have not confirmed the probe; however, they have in recent weeks seized police financial records pertaining to fees the city collects when its officers are hired out to work off-duty security details.

Harper resigned a week after the FBI gathered those records, and just days after City Controller Michael Lamb announced an audit of the force's special events office.

Ravenstahl has denied wrongdoing and said he's been told by investigators that he's not targeted by the investigation but is cooperating in it. He announced March 1 that he won't seek re-election.

Before Harper's resignation, the mayor ordered a review of the police bureau on Feb. 8 after learning that Harper partnered with four subordinates to form a private security firm.

An attorney representing Commander Eric Holmes, one of those involved in the security firm, announced earlier this month that the company was disbanding.

That attorney, Patrick Thomassey, said then that none of the work done by the fledgling company "involved public time. It was all on their own time," he said.

Harper has previously said the company, Diversified Public Safety Consultants, was never operational, but was instead set up as something Harper said he would work on when he retired.

Despite the chief's claim that the security company was dormant, Thomassey said Diversified Public Safety Consultants generated $5,600 last year from three customers, including the city-county Sports & Exhibition Authority, which runs the city's professional sports stadiums and convention center.

The grand jury met Friday morning to consider as many as six charges against the former police chief.

Suspended police finance manager Sandra Ganster appeared before the grand jury early in the morning.

Ganster told Action News' Paul Van Osdol that this has been a very difficult time because she likes Harper, but she would not say what questions she was asked. Her attorney, Bill Difenderfer, was also present.